The Role of the management accountant in value creation
Today’s management accountants are required to have competencies in cost management, performance measurement (financial and non-financial), process management and risk management as a result play a fey role in decision making across the various functional areas of an organization Managerial accounting: the form of accounting concerned with providing information to managers for use in planning and controlling operations and for decision making Financial accounting: the form of accounting concerned with providing information to shareholders, creditors, and others outside the organization The work of managers and their need for managerial accounting information Every organization has managers – someone must be responsible for making plans, organizing resoures, directing personnel, and controlling operations. Managers carry out three major activities:
Planning: developing objectives and preparing budgets to achieve these objectives Directing and motivating: mobilizing people to carry out plans and run routine operations Controlling: ensuring that the plan is actually carried out and is appropriately modified as circumstances change Strategy: a game plan that enables a company to attract and retain customers by distinguishing itself from competitors The reasons a company creates for customers to choose it over its competitor is called customer value proposition Customer value propositions fall into three categories:
Customer intimacy (i.e. Cisco systems, KEG steakhouse)
Operational Excellence (i.e. WestJet, Walmart)
Product Leadership (i.e. BMW, RIM)
An important part of planning is to identify alternatives and then to select from among the alternatives the one that best meets the organization’s objectives I.e. Metro Coffee Inc.’s objective is to make profits for the owners of the company by providing superior service at competitive prices in as many markets as possible. When making the choice of expansion: management must balance the expansion opportunities against the demands made on the company’s resources Top management looks at the sales volumes, profit margins, and costs of the company’s established outlets in similar markets Budget: a quantitative plan for the acquisition and use of financial and other resources over a specified future time period Controller: the manager in charge of the accounting department in an organization Directing and Motivating
In addition to planning for the future, managers must oversee day to day activities and keep the organization functioning smoothly Requires motivating and directing people, managers assign tasks to employees, arbitrate disputes, answer questions, solve on-the-spot problems and many small decisions that affect customers and employees Controlling
Control: those steps taken by the management that attempt to increase the likelihood that the objectives developed at the planning stage are attained and to ensure that all parts of the organization function in a manner consistent with organizational policies Feedback: accounting and other reports that help managers monitor performance and focus on problems and/or opportunities that might otherwise go unnoticed Performance report: a detailed report comparing budgeted data to actual data The results of managers’ activities
What the customer experiences doesn’t simply happen: it is the result of the efforts of managers who must visualize and fit together the processes that are needed to get the job done The Planning and Control Cycle
Planning and control cycle: the flow of management activities through planning, directing and motivating and controlling and then back to planning again Managerial accountants typically provide reports that help answer questions such as: How much does it cost to provide a particular good or service? How many units must be sold to break even?
The Business Plan
Includes information about production methods, the competition,...
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